As indispensable as morning coffee, Cashin's early thoughts, as always via UBS

Coincidence Versus Causation And A Poorly Worded Headline – As just indicated, some testy words from Greek politicians sharply heightened fears that a rescue package might fail. The resultant plunge in the Euro combined with a surprise jump in jobless claims to send stock futures sharply lower as the New York opening loomed.

When the opening bell rang, it was followed by near panic selling. In the first twenty minutes, the Dow plunged nearly 180 points. The markets spent the next two hours milling about near those lows warily watching the dollar basket (DXY). Around noon, the DXY began to pull back from the day’s highs (circa 81.13). Warily, the stock market began to tick timidly higher. Initially little progress was made. Then at 1:15, a Dow Jones headline hit. It seemed to say that the EU would not let Greece default. That created an instant buzz on trading floors and trading desks. The DXY pullback turned into a plunge. Stocks began to rally sharply in response.

While the reaction was undeniable, the headline it was based upon was somewhat flawed. It turned out that the EU did not make the statement as the buzz assumed. Instead, the headline was simply the opinion of an analyst at DB Advisors. But that realization came only after the rally was a full throttle.

There was also an interesting example of confusing coincidence and causation as the catalyst of the rally

As the DXY was falling and the EU headline was hitting, someone on CNBC speculated that Apple might be getting ready to split its stock, with four new shares for each existing share. That naturally prompted some short covering in Apple.

Somehow, several TV pundits began to attribute the whole rally to the speculation that Apple might split. That was like attributing the Johnstown flood to a leaky toilet in Altoona, Pennsylvania.

Gold Opts Out Again – In Thursday’s Comments, we noted that traders had noted that gold had failed to move in lock step with stocks and oil as it had done for weeks and weeks. We said that there was little agreement about what caused gold to opt out in Wednesday’s session.

Yesterday, gold went its own way again. This time gold rallied even as stocks, oil and the Euro plunged. This time, however, the cause of the separation was quite evident. There were reports out of Russia that China had bought over 200tons of gold from the IMF.

Our good friend, Dennis Gartman, took note of the Russian claims in his letter this morning.

Here’s a bit of what he wrote:

The strength in the precious metals is blamed upon rumours yesterday that began in Russia in the Russian newspaper Pravda. The article in question said that Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market. China is interested in the development of the domestic consumer market,” the agency reports…Most of Chinese citizens believe that investing in gold jewelry is a good way to avoid inflation, Rough & Polished agency said. The IMF has received the profit of $7.2 billion from gold sales. A part of the funds is to be used for crediting poorcountries.

The possible purchase by China had been the subject of rumors for weeks. While there was no corroboration of the Russian claims, it seemed to inspire the gold bugs, and kept the yellow metal firm.

Cocktail Napkin Charting – In Thursday’s Comments, we wrote that the napkins suggested support in the S&P lay at 1088/1092. The opening plunge took the S&P to a low of 1086 about 15 minutes into the session. That low lasted a nano-second and the index proceeded to churn at the 1088 level for much of the morning.

In the same Comments, we said the napkins showed resistance at 1104/1108. The late session rally topped out at 1103.50.

For today, we’ll stick with yesterday’s numbers. Support should be 1088/1092 with a critical back up of 1080/1083. Resistance looks like 1104/1108 with backup at 1113/1118.

Today – We get GDP revisions and the Chicago PMI. Lots of interest will focus on the 9:55 release of the University of Michigan Confidence number. Will it confirm the steep plunge in Consumer Confidence?

At 10:00, we’ll get standing home re-sales, followed by several Fed speakers over the day.

Consensus – East Coast snow may put a dent in the volume. Follow the bouncing buck. Stay very nimble.

Trivia Corner

Answer to Jekyll and Hyde - The name that contains another is "Gregory." Reverse the interior five letters and you get"Roger."

Today’s Question - A Part Time Job - A roofer sent Ronnie to buy some rope. Ronnie kept repeating the length but accidentally transposed the feet for the inches. He came back with a rope only 30% of size he was sent for. What size did Ronnie get and what size was he sent for?

History

On this day in 224 B.C., a world-shaking event struck the Middle East. And, for a change, it was not a battle nor a religious revolution. In this case it was just a geologic world-shaking event - the type we call an earthquake.

It ruptured and demolished the statue of Helios which stood at the entrance of the harbor at the then vibrant city of Rhodes. Crafted of bronze remnants of the war machines of earlier military victories, this huge sculpture by Chares of Lindos was deemed a wonder. In fact, it was nearly 12 stories high and became known as the Colossus of Rhodes, one of the seven wonders of the ancient world.

Though it fell in only the 60th year of its existence, no one attempted to rebuild it. Through the birth of Christianity and of Islam, it lay as a broken dream. Finally in 672 A.D., the then current rulers of the town sold it to a scrap metal merchant from Edessa.

To celebrate buy a colossal drink for some misguided modern day mid-east potentate.

Explain that eternal glory is a tough thing to measure on current quantum-mechanics space/time continuum. Then drop him off at the fallen idols junkyard.

The potentate who initially moved the markets yesterday was not in the Mid East. The shaking came from Athens. And, it didn’t come for a potentate. It came from political populism. Several Greek officials, perhaps motivated by the street unrest that accompanied the general strike, opted to lash out at Germany as the embodiment of those pushing for austerity in Greece. The result of that outburst was a plunge in the Euro.

To me that action yesterday afternoon was nothing but proof that our markets have been taken over by computers and thugs.Someone (who?) floated a rumor that AAPL was going to do a 4 for 1 stock split just as prices were tapped below the very important 1,090 level following more very negative economic data.This morning ZeroHedge produced data showing that Goldman placed a huge long in the futures market just prior to the rumor being floated—the rumor was later denied, by the way, and Goldman was selling into the close after pocketing a tidy seven-figure profit on the day.

Here’s what my Schwab account daily summary stated:

Unless you are a day trader, this is a difficult market to make a big directional bet.On Tuesday, the DJIA dropped 100 on the dismal consumer confidence number.Yesterday, it rose 90 on Ben’s comments on easy money.Today, it was 190 points down in the morning on an unexpected rise in jobless claims and renewed concerns about Greece.But, amazingly, it suddenly popped higher in the afternoon to close with only a 53.13 point (-0.51%) loss at 10321.03.

Oh yes, “Amazingly.”

This type of action is absolutely driving out small investors.Frankly I think a person is nuts to put any money in any market in which any of the big banks have any input whatsoever.I also reiterate that your money should not be on deposit at those institutions, I can assure you that not one penny of my money is.

Since our government has been taken over by the same interests, the regulators not only look the other way, but they encourage and support this type of market activity.But since the bankers own the markets…

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